After two years of controversy, the $98,000 "People Sculpture" by artist George Sugarman was finally installed this week on the plaza in front of Baltimore's new Edward A. Garmatz Federal Courthouse, the building where Maryland Gov. Marvin Mandel was recently tried and convicted.

The sculpture went up despite the opposition of federal judges who work in the building, and who deemed the work "inappropriate." Trouble continues. The formal dedication planned for Sept. 7 was recently called off at the request of some federal judges because the former Baltimore congressman for whom the building was named is under indictment by a federal grand jury.

"The judges feared the dedication and trial might coincide," said John Galuardi, regional administrator of the General Services Administration (GSA), "and that the ceremony might hinder selection of an impartial jury." Garmatz is charged with taking $15,000 in bribes from two shipping companies in return for promoting legislation favorable to the shippers. He has pleaded not guilty.

Dedication or not, artist George Sugarman, 62, was jubilant as fabricators from Lippincott, Inc., of North Haven, Conn., sited the 40 by 50 foot aluminium sculpture. Made of brightly colored, overlapping cutout forms, the space'enclosing "environment" was meant to be "something the public can stroll in and sit upon; something they'll feel comfortable with. It is even more beautiful than I had hoped," he said, after siting was completed yesterday.

"What is it?" - the traditional baptismal words for most new abstract sculpture - was the reaction of several others who watched the installation.

The 17-foot-high sculpture was commissioned by the GSA as part of its "Art in Architecture" program which, since 1974, has allotted 1/2 of 1 per cent (cut back last year to 3/8 of 1 per cent) of building costs for works of art to adorn new federal buildings.

After viewing the model two years ago, the judges mounted a vigorous campaign to have the work stopped both on esthetic and security grounds. After a public hearing held last fall, protests led by Artists Equity and arts figures were followed by a GSA decision to go ahead. Only Edward Garmatz testified against the work at the public hearing.

Like the sculpture, the building itself has not yet been officially dedicated, though it does carry a plaque with Garmatz' name. Congress named the building by public statute in 1972, along with several others. The GSA confirmed yesterday that it has final authority to name buildings, whether named by statute or not.

The dedication of the sculpture has been set for next June.